The organization and its operations are analyzed, including

confidencetoughManagement

Nov 20, 2013 (3 years and 9 months ago)

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Evaluation made of management's performance and conformity
with policies and budgets.


The organization and its operations are analyzed, including
appraisal of structure, controls, procedures
,
and processes.


An operational audit is a comprehensive form of an internal audit.
This type of audit attempts to improve the efficiency and the
effectiveness of the internal operations.



What is the Objective (Generally)


The objective is to appraise the effectiveness and efficiency of a
division, activity, or operation of the entity in meeting
organizational goals


-
Understand the responsibilities and risks faced by an
organization;



-
Identify, with management participation, opportunities for
improving control;




-
Provide senior management of the organization with a



detailed understanding of the Operations.






Normally, this involves the following Five steps


The process normally begins with an introductory meeting
to inform the unit's senior management that an audit will
take place, to explain the process, and to gather background
information.


Following the introductory meeting, the auditor performs a
preliminary gathering of information using various sources
of information (for example, the unit's web site) to identify
the possible components and concerns. At the end of this
stage, a binder is prepared and is used in the risk
assessment meeting with the auditees.



The Field Survey involves meeting the key managers of the
Company or faculty or unit to be audited. One objective of
the Field Survey is to obtain confirmation of the components
and major concerns of the company


project.



The auditor begins to develop his audit program by
meeting with the managers of the high
-
risk areas to
identify the key management objectives and the key
control activities performed. After these meetings, the
auditor documents the key management objectives and
the key controls.



.


This is usually the most time consuming step in the audit
and it is important for all information to be carefully recorded
and documented in order to be able to refer to it after the
physical audit has taken place. If the audit application step is
done effectively, the reporting and follow
-
up step is much
easier to perform.


This is perhaps the most critical part of the operational audit. A good
audit report will effectively communicate the recommendations and
conclusions to management. The report will be supported by all the
documented facts, findings, and opinions that were gathered during the
audit application. The reporting step should include a follow up step to
determine what if any action needs to take place in order to improve the
operations of the company.






The draft report uses the following standard structure:


Purpose


Scope


Results


Audit Opinion


Recommendations


The report review and discussion process is designed to arrive at agreed
action plans to resolve identified issues. Any management
-
accepted risks
and differences of opinion are also reported.








FINANCIAL
AUDIT



OPERATIONAL AUDIT



A
financial audit
, or more
accurately, an
audit of financial
statements
, is the review of the
financial statements of a company or
any other legal entity, resulting in
the publication of an independent
opinion on whether those financial
statements are relevant, accurate,
complete, and fairly presented


Standards
-

ISA International
Standards on
Auditing



The objective

of an audit of
financial statements is to enable the
auditor to


express an opinion whether the
financial statements are prepared, in
all


material respects, in accordance
with an applicable financial
reporting


framework.









An operational audit is a more
comprehensive form of an
internal audit. This type of
audit is attempts to improve
the efficiency and the
effectiveness of the internal
operations.
Its objectives
vary
a lot and are determined by
the management of the
company, based on their own
scope


Standards
-
Not governed by
ISA (International Standards
on Auditing)




Operational audit focuses on the appraisal of the effectiveness
and efficiency of a division, activity or an operation of an
organization in order to determine whether it meets management
objectives and achieves other established criteria. The operational
audit helps you judge the level of control a management exercises
on various organizational activities, functions or business units
and provide an insight into management achievement in terms of
performing its responsibilities and mitigating the risks associated
with the business operations. If Conducted regularly an
operational audit will eliminate the risk of encountering cash
shortages and assist companies facing operational issues that
could easily have been avoided through proper planning, and
improve business productivity. The earlier an operational audit is
instituted in a business entity, the better it is for the health of the
business.



Production Areas Sales Issues Marketing and Promotion








Low Low Low





Medium Medium Medium





High High High





N/A N/A N/A














Advertising and Branding Customer Service








Low Low





Medium Medium





High High





N/A N/A


Operational Audit
Checklist
Descriptions




Production Areas



Of critical importance to
manufacturing and product
-
creation companies, the production
function details form a major
section of the audit. Checklist items
often include
relationships with
suppliers and staff, inventory
management and control,

alternate
sources

of raw materials,
and all items involved in product
creation
,
ongoing maintenance
procedures,
production
-
employee
training programs, processing
procedure documentation, use of
best available technology, and
environmental protection policies.





Operational Audit
Checklist
Descriptions




Sales Issues




Sales departments require
examination of all facets of this
critical function. Operational
audit
checklists typically
include analyzing the
company's competition and
customers
,
product pricing,
sales channels, sales
philosophies, and sales
personnel
. If the company
conducts electronic (or
telephone) sales along with or
in lieu of the brick
-
and
-
mortar
variety, their back
-
office or call
-
center operations will appear on
operational audit checklists.


Operational Audit
Checklist
Descriptions




Marketing and
Promotion



Marketing and promotion
activities occupy important
positions on operational audit
checklists. Quality and
effectiveness of websites is usually
examined in detail. It is sometimes
challenging for internal or external
auditors to comment on how
attractive the site is, but quality,
ease of navigation, and timeliness
of content can be evaluated. Other
promotional activities, like
community involvement,
charitable efforts
, and other for
-
profit or non
-
profit partnerships
that promote the organization are
viable checklist items.





Operational Audit
Checklist
Descriptions






Customer Service



Customer service checklist items
include quantity and quality of
customer service personnel
responses, feedback to determine
customer satisfaction levels,
timely customer
question/problem follow
-
up,
and
level of company understanding of
its customer base. Identifying areas
needing improvement may
generate further detailed checklist
items to evaluate specific
operational enhancements that
could increase customer
satisfaction
.




Status :





Operational Audit Checklist
Grades :


Declining visitor arrivals,
low occupancy




( poor economy)



Production Issues N/A



Sales Issues Low



Marketing Medium



Advertising Medium



Customer Service High


OPERATIONAL AUDIT
ASSESSMENT:


TO BECOME PROFITABLE


Better understanding of
competitors



Retraining of sales
Personnel



Competitive pricing



Revamping of Marketing
and advertising



Status :



Increased Gas and fuel
charges (Global)



Led to increased price
of Gas



Customer
dissatisfaction


Operational Audit
Checklist Grades


Production Issues
Medium



Sales Issues Low



Marketing
Medium



Advertising
Medium



Customer Service low


TO BECOME PROFITABLE


Operational Audit
Assessment:



Better understanding of
competitors ( What is
Shell doing)



Retraining of sales
Personnel (Educate Staff)



Reengineered of
Marketing and advertising
programs


Status


Government has
reduced budget & fewer
Teachers available to
teach



Operational Audit
Checklist Grades

:


Production Issues N/A



Sales Issues N/A



Marketing low



Advertising& Branding low



Customer Service low


TO BECOME PROFITABLE


Operational Audit
Assessment:


-

Improved local Community
involvement



( may increase the number of
students)



-
retraining of School Official
in managing Parents



-

Perhaps employ part time
teachers








For all organizations to be successful, it is essential to
conduct some form of audit at regular intervals. An
increasing number of organizations, whether private or
public, big or small, have been deploying various auditing
services, such as value
-
for
-
money auditing, efficiency
auditing, performance auditing, management auditing and
most of all operational auditing, over the past few years.
Although these various terms may appear vastly different,
their ultimate goal is the same
-

to boost the operational
efficiency and effectiveness of an enterprise.



Operational auditing itself is not new


but the operational
auditing methodologies of today's world class organizations
are. And in order for a company to remain profitable I
would strongly suggest the implementation of a
comprehensive detailed financial analysis, such as an
Operational Audit.